Court affirms download patent

E-Data insists it owns the patent for Internet software downloads, and an appeals court says the company may be right. At stake are licensing fees that could make the E-Data richer than Microsoft.

A federal appeals court has for the second time breathed life into a patent that could force software vendors to pay licensing fees to sell their products directly over the Internet.

A full panel of judges on the Federal Circuit US Court of Appeals on Friday ordered a lower court that effectively had thrown out the patent to reconsider its scope more broadly.

The decision is a setback for software makers including Intuit and AOL Time Warner's CompuServe unit, which have been battling a small Secaucus, NJ-based company known as E-Data for years over the patent, which dates back to 1985.

E-Data's defendants say the company's claim would entitle it to licensing fees for all Internet software downloads.

"This is the case that would not die," said Carl Oppedahl, attorney with Dillon, Colo-based Oppedahl & Larson, which is defending Softlock Services in the case. "It has been going since 1995, and it isn't over yet. If the patent owner prevails in its view, they stand to be wealthier than Microsoft."

In March 1999, the US District Court for the Southern District of New York ruled that the defendants had not infringed E-Data's patent and that the patent had a scope too narrow to apply to Internet downloads in general. The patent, the court said, applied more to downloads through "kiosks" and other physically based retrieval systems.

In November 2000, the US Court of Appeals for the Federal Circuit threw out that decision, ruling that the district court had too narrowly interpreted the patent.

Friday's decision by the same appeals court meeting with all its active judges, or en banc, essentially upholds its previous decision that the patent should be read more broadly.

"The gist of it is that the court is sticking with its interpretation that the District Court had too narrowly read the claims of the patent," said Neil Smith, a lawyer with Howard, Rice, Nemerovski, Canady, Falk & Rabkin in San Francisco. "The companies that had mostly Internet-based systems were likely able to get out based on the District Court's ruling. They no longer can do that."

The appeals court sent the case back to the District Court for a new hearing.

Defendants in the case include CompuServe, Broderbund Software, Intuit, Waldenbooks and Ziff-Davis Publishing.

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